You might think that by being a skilled entrepreneur, you can avoid running out of cash. But the statistics speak for themselves: around 25 percent of all companies fail because of cash flow issues. In other words, perfectly viable businesses go under because they don’t have enough cash on hand to pay for essential expenses, like wages.
Many entrepreneurs have found themselves out of cash in the past. Here’s their advice for dealing with it.
Get Customers To Pay Up Front
Got a cash flow problem? There’s a simple solution according to the founder of Sky High Party Rentals, Robert De Santos. He says you can eliminate the problem of late payments and cash flow problems down the road by getting customers to pay up front (or at least paying part of the bill up front and the rest later). This will give you the cash injection you need to remain profitable on a week by week basis (assuming you’re not blowing money on things that are unnecessary).
Cut Your Own Salary
Another reason your business could be failing is that you’ve set your own salary too high. Perhaps you’re just not worth as much as you were in the past, or your product isn’t as popular. Sometimes it’s a good idea to scale back your own earnings until you find a way to add value again, otherwise your company could fail. If things are really bad at your business, think about your “minimum viable salary.” In other words, how small an amount of money would you be willing to work for to continue running your business (and hopefully make a success of it)?
Create Short Term Finance
When you’re out of cash, you need a cash injection quick before you start letting down employees, customers and suppliers. If your company has any assets whatsoever, it can usually use these as collateral for relatively inexpensive lines of credit. Visit Equify for info on this subject. Once your business has the stop-gap cash it requires, it can continue operations uninterrupted, win more business, and dig its way out of the hole it’s in.
Find Out Why
The CEO of Warpify, Phil Chen, says that main thing to do when you find your business strapped for cash is to find out why. Is there a good reason you’re not making money month to month? Is there something wrong with your supply chain? Do customers want your product ? Is there an issue with your invoicing? He says that if you’re even going to solve the problem of weak cash flow, then you need to stop the bleeding at its source. Otherwise, you could find yourself strapped for cash again in the future.
Review Your Subscriptions
Companies are very good at convincing you to sign up for recurring subscriptions to their services, especially inexperienced startups who believe they need all the tech tools they can get. It’s a good idea, therefore, to review all your subs and see whether they’re offering you and the other people in your business real value. If not, get rid of them.